Module 3 · Chapter 7

Material Contracts

A trading company is largely its contracts. This chapter shows how to find the ones that matter, read the clauses that let the other side leave, and handle a customer the sale may drive away.

≈ 12 min read 8-question test

In this chapter

  • How to decide which contracts matter, beyond what they are worth
  • Which clauses to read first, and why a share sale triggers some of them
  • What a buyer can do about a customer's right to leave

7.1Material contracts in one paragraph

A material contract is one whose terms, breach or loss could affect the price, the SPA or the deal itself. The contracts workstream asks two questions about each one. What does it say about who can leave, when and at what cost? And what will the sale itself do to it?

A contract can work well for years and still let the other side leave the day the shares are sold. On Project Sunrise, that is how a customer contract became one of the report's two HIGH findings.

Key point

Materiality is about consequence, not invoice size. The money line decides how much reading time a contract gets. What its loss would do to the business decides what a finding is worth.

Also in this chapter

  1. Value is a filter, not the test
  2. Eight questions for every contract
  3. A right to leave without a reason
  4. Why a share sale triggers change of control
  5. The Novapay clause
  6. What a buyer can do about a customer's right
  7. Concentration makes every clause heavier
  8. Change of control beyond the customer folder
  9. On an asset deal, every contract must move
  10. Your job

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